Dave & Buster's Entertainment, Inc. (PLAY) shares opened marginally higher during Wednesday's session after Raymond James upgraded the stock to Strong Buy with a price target of $25.00 per share.

Key Takeaways

  • Dave & Buster's shares moved higher during Wednesday's session after Raymond James upgraded the stock to Strong Buy with a $25.00 price target.
  • Analyst Brian Vaccaro believes that liquidity concerns have abated and that the recent business update points to a compelling risk/reward ratio.
  • Traders should watch for a breakout from trendline resistance and the 200-day moving average near $20.00 over the coming sessions.

Analyst Brian Vaccaro said that the recently completed high-yield note offering effectively shelved liquidity concerns well into 2022 and that the risk/reward ratio has become more compelling after last week's sales and business update. While COVID-19 risks remain, the analyst believes that Dave & Buster's sales will continue to recover as consumers return to the brands and units in California and New York that are eventually permitted to reopen.

The move comes shortly after BMO Capital's Andrew Strelzik upgraded Dave & Buster's stock to Outperform from Market Perform and raised his price target from $17.00 to $26.00 per share, citing similar catalysts. The analyst believes that EBITDA potential should at least approach, if not return to, pre-pandemic levels, skewing risk/reward to the upside.

Chart showing the share price performance of Dave & Buster’s Entertainment, Inc. (PLAY)
TradingView.com

From a technical standpoint, the stock is attempting to break out from trendline resistance and the 200-day moving average at around $20.00. The relative strength index (RSI) is approaching overbought territory with a reading of 65.86, but the moving average convergence divergence (MACD) is trending higher. These indicators suggest that the stock could see some near-term consolidation, but the overall trend remains bullish.

Consolidation is a technical analysis term referring to security prices oscillating within a corridor and is generally interpreted as market indecisiveness. Said another way, consolidation is used in technical analysis to describe the movement of a stock's price within a well-defined pattern of trading levels.

Traders should watch for a breakout from trendline resistance and the 200-day moving average near $20.00 toward reaction highs of $23.43. If the stock breaks out, traders could see a move toward $23.43 or Fibonacci resistance levels near $21.00. If the stock fails to break out, traders could see consolidation between these resistance levels and the 50-day moving average at $16.24, although that scenario seems less likely to occur.

The Bottom Line

Dave & Buster's shares moved higher during Wednesday's session after Raymond James upgraded the stock to Strong Buy with a $25.00 price target, citing reduced liquidity concerns and a compelling risk/reward ratio.

The author holds no position in the stock(s) mentioned except through passively managed index funds.